Exclusive SadaNews: Israeli Discount Bank Decides to End Its Relationship with Palestinian Banks

Exclusive SadaNews: The decision by Israeli Discount Bank to inform Palestinian banks of its intention to completely end their banking relationship within 90 days has raised widespread questions regarding the background and motivations behind this decision, especially considering the vital importance of this relationship for the continued flow of payments and trade between the two sides.

The bank had notified the banks operating in Palestine in early June 2026, coinciding with the extension of banking correspondence agreements for a two-week period ending on June 14, based on a guarantee letter issued by the Israeli Ministry of Finance, that it intends to cease dealing with them entirely after the expiry of the ninety-day deadline, as SadaNews learned.

In an effort to understand the background of the decision, "SadaNews" conducted a review of the ownership structure of Discount Bank, its executive management, and its board of directors, as well as investigated the possibility of there being a direct or indirect relationship with Israeli Finance Minister Bezalel Smotrich, who has led a strict policy toward the Palestinian Authority and the Palestinian banking sector for several years.

The review showed no known relationship between Smotrich and the bank's management or board of directors or major shareholders, and there are no indications of him having direct influence within the banking institution according to the review by the Hebrew translation department at SadaNews. On the contrary, the facts indicate that Discount Bank was among those affected repeatedly by the policies of the Israeli finance minister in recent years.

Like other Israeli banks, the bank faced increasing regulatory and financial pressures, including the imposition of additional taxes on banking sector profits, along with the continuing uncertainty related to the banking relations with banks operating in Palestine, where Smotrich has been accustomed to extending government guarantees for short and successive periods, ranging from weeks to months, leaving Israeli banks facing ongoing legal and operational risks, just as is the case with banks operating in Palestine.

The bank also faced additional challenges related to its operations within Israel, including international criticism and pressure regarding banking activities in Israeli settlements, which have heightened the legal and reputational risks that Israeli financial institutions face.

Based on this information, the editor-in-chief of SadaNews believes that Discount's decision may not result from a direct directive from Smotrich as much as it reflects a state of fatigue and unwillingness to continue within an unstable and unclear working environment. Continued reliance on short-term extensions of government guarantees puts the bank in a perpetual state of risk, which may push it to seek a definitive exit from this relationship.

From this perspective, the bank's recent move can be read as a clear message to decision-makers in Israel that the management of banking relations with banks operating in Palestine through temporary and repeated extensions is no longer commercially and bankably acceptable, and that the Israeli banking sector is seeking more stable and clear solutions that ensure the protection of its legal and financial interests in the long term.

The most important question remains: Does Discount's decision mark the beginning of a broader trend within the Israeli banking sector to reconsider its relationships with Palestinian banks, especially Bank Hapoalim, or is it merely a pressure step aimed at pushing the Israeli government to make a more stable decision regarding the future of these relations?

The decision by Discount Bank holds exceptional significance as the bank, alongside Bank Hapoalim, forms the backbone of banking relations between Israel and Palestine, managing most of the banking correspondence relationships with banks operating in Palestine, including settlements of payments in shekels, money transfers, and commercial transactions between the two sides and shipping excess Israeli shekels that burden banks operating in Palestine.

Discount Bank is one of the largest banking groups in Israel, established in 1935, and ranks among the five largest Israeli banks in terms of assets and banking activity. Bank Hapoalim, established in 1921, is considered the largest or second-largest bank in Israel according to asset and deposit size in recent years and has a wide presence in the Israeli and international banking markets.

Therefore, any change in the policies of these two banks towards Palestinian banks is not seen as an ordinary banking decision but as a development that could have direct implications for trade and financial transfers between Palestine and Israel. This underscores the importance of the signals conveyed by Discount Bank's recent position, which may reflect an increasing discontent within the Israeli banking sector regarding the policy of temporary and repeated extensions governing the banking relationship with the Palestinian side.